Exemptions

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Debtor Cannot Exempt His Interest in Ex-Wife’s Retirement Accounts

Accounts the debtor received from his ex-wife in a divorce were not retirement accounts for bankruptcy exemption purposes because, even though his ex-wife had contributed to the accounts for retirement, his interest was merely through a property settlement. Lerbakken v. Sieloff and Assoc., P.A., No. 18-6018 (B.A.P. 8th Cir., Oct. 16, 2018).

The bankruptcy court disallowed chapter 7 debtor, Brian Lerbakken’s, claimed exemptions for a 401K account and an IRA that he had received in a property settlement when he and his wife divorced. The funds in the accounts were contributed in their entirety by his ex-wife. [Read more…] about Debtor Cannot Exempt His Interest in Ex-Wife’s Retirement Accounts

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Property Tax Refund Not “Based on Need” for Exemption Purposes

The debtor’s tax refund under Minnesota’s Property Tax Refund Act was not “government assistance based on need,” and therefore she could not exempt it in her bankruptcy. Hanson v. Seaver (In re Hanson), No. 17-1192 (8th Cir. Sept. 11, 2018).

The circuit court affirmed the BAP’s finding that chapter 7 debtor, Sheri Hanson, could not exempt her tax refund under Minnesota’s Property Tax Refund Act (PTRA), which provides for taxpayers to receive a refund when their property taxes exceed a certain percentage of their household income. [Read more…] about Property Tax Refund Not “Based on Need” for Exemption Purposes

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Impairment to Exemption Calculation Based on Debtor’s Half Interest in Property

A debtor seeking to avoid a lien as impairing a homestead exemption must calculate the impairment using his proportionate interest in the property and the sum of the corresponding mortgage liens in proportion to that interest. Sandoval Irrevocable Trust v. Taylor, No. 17-1241 (10th Cir. Aug. 14, 2018).

As a result of Mark Taylor’s misappropriation of funds from an Irrevocable Trust for which he was trustee, the Trust (Sandoval) obtained state court judgments against him and liens against his residence. Mr. Taylor filed for chapter 13 bankruptcy and listed the property, which he co-owned with his ex-wife, as having a total value of $560,000 with his portion amounting to $280,000. He later converted his case to chapter 7 and moved to avoid the judgment liens as impairing his state homestead exemption of $37,500. [Read more…] about Impairment to Exemption Calculation Based on Debtor’s Half Interest in Property

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Debtor Wins Battle of the Code Sections: Exemption vs Set-Off

A debtor’s right to an exemption for a tax refund overrides the IRS’s right to set-off of that refund to pay tax liabilities. United States of Amer. v. Copley, No. 16-207 (E.D. Va. Sept. 10, 2018).

In their chapter 7 bankruptcy, Matthew and Jolinda Copley listed tax liabilities for the years 2008, 2009, and 2010, as priority claims held by the IRS. They also sought to exempt their 2013 tax refund of $3,208.00. But the IRS withheld the refund as set-off against a portion of the tax debts. The bankruptcy court ordered the IRS to turn over the refund to the debtors. [Read more…] about Debtor Wins Battle of the Code Sections: Exemption vs Set-Off

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Court May Not Deny Exemption Due to Debtor Misconduct

“A bankruptcy court has no authority under federal law to deny a debtor’s claim of exemptions on a ground that is not specified in the bankruptcy code.” Rucker v. Belew (In re Belew), No. 18-6007 (B.A.P. 8th Cir. Sept. 6, 2018).

Johnny Belew sought to amend his schedules to exempt assets he had failed initially to disclose. The trustee objected. The bankruptcy court found that it had no authority to deny a motion to amend exemptions for any reason not specified in the Code and overruled the trustee’s objections. The trustee appealed. [Read more…] about Court May Not Deny Exemption Due to Debtor Misconduct

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Fourth Circuit Applies Choice of Law Approach to Exemptions

The “state-specific” approach to application of exemption laws applies when determining whether the debtor may use the exemptions from his former domicile state with respect to property located in the bankruptcy state. Sheehan v. Ash, No. 17-1867 (4th Cir. May 4, 2018).

In their chapter 7 bankruptcy filed in West Virginia, Keith and Phyllis Ash sought to apply the exemption laws of their prior domicile state, Louisiana, to exempt approximately $3,500 in various items of personal property located in West Virginia. The trustee objected to application of Louisiana exemption law. The bankruptcy court overruled the objection and the district court affirmed. Sheehan v. Ash, No. 1:16-cv-109 (N.D. W. Va. June 27, 2017). [Read more…] about Fourth Circuit Applies Choice of Law Approach to Exemptions

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Homestead Post-Petition Sale Proceeds Retain Exempt Status in Chapter 7

Proceeds from the post-petition sale of the chapter 7 debtor’s homestead did not become part of the bankruptcy estate even though the debtor did not reinvest them in another homestead. Lowe v. DeBerry (In re DeBerry), No. 17-50315 (5th Cir. March 7, 2018).

When Curtis DeBerry filed for chapter 7 bankruptcy he exempted his homestead without objection by the trustee. Post-petition he sold the residence and transferred some of the proceeds to his wife and used the rest to pay unrelated criminal attorney fees. The trustee filed an adversary complaint arguing that, because Mr. DeBerry did not reinvest the proceeds in another homestead within six months as required by Texas proceeds law, the proceeds were not exempt. The bankruptcy court found in favor of Mr. DeBerry and the district court reversed. [Read more…] about Homestead Post-Petition Sale Proceeds Retain Exempt Status in Chapter 7

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Debtor May Exempt 100% FMV When Value Does Not Exceed Statutory Cap

“There are certain situations where a debtor claiming federal exemptions under § 522 of the Bankruptcy Code can claim an exemption of a 100% interest in an asset. What we do not decide is whether doing so entitles such a debtor to clear title in that asset and any post-petition appreciation.” Ayobami v. Peake, No. 16-20589 (5th Cir. Jan. 3, 2018). [Read more…] about Debtor May Exempt 100% FMV When Value Does Not Exceed Statutory Cap

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“Snapshot” Rule Precludes Amended Homestead Exemption

The snapshot rule governs whether the chapter 13 debtor may claim a homestead exemption for one residence after the residence for which she originally claimed the exemption was subject to foreclosure. Earl v. Lund Cadillac, LLC, No. 16-16428 (9th Cir. Nov. 27 2017) (unpublished).

When Rachael Earl filed her chapter 13 petition she owned two residential properties: Claiborne and Sunnyvale. She resided in the Claiborne property and she claimed it as her homestead exemption. Unable to stop the foreclosure proceedings on that property, however, Ms. Earl converted to chapter 7 and sought to claim an exemption in the Sunnyvale property. The bankruptcy court sustained the unsecured creditor’s objection, and the district court affirmed. [Read more…] about “Snapshot” Rule Precludes Amended Homestead Exemption

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Trustee $65,000 Fee Application Denied

“Trustee’s plan of action from the minute he was assigned these Chapter 7 cases was abundantly clear: he sought to manufacture equity through the Stipulations and Carve-Outs with the IRS in order to sell the Homesteads and generate funds that would primarily benefit Trustee, Counsel, and other bankruptcy professionals, while only minimally benefitting unsecured creditors.” Based on this conclusion, the Bankruptcy Appellate Panel for the Tenth Circuit, in a lengthy opinion, upheld the denial of over $65,000.00 in fees for the chapter 7 trustee and his counsel. Jubber v. Bird (In re Bird), Nos. 16-39, Jubber v. Christensen (In re Christensen), 16-40 (B.A.P. 10th Cir. Nov. 30, 2017). [Read more…] about Trustee $65,000 Fee Application Denied